Abstract

We document the globalization backlash using newly assembled data covering 23 advanced democracies, over 1980-2019. The protectionist and isolationist shift in politics is detectable from the mid-1990s onwards, with the only exceptions of Australia and New Zealand. Until the financial crisis, the backlash is mostly driven by rising support for anti-globalization parties on the right of the political spectrum. From the crisis onwards, there is also a surge in support for protectionist parties of the left, especially in Europe.

From the theoretical point of view, the globalization backlash may arise within standard trade models once we account for the social footprint of globalization. With this term we refer to persistent welfare losses that arise from trade-induced factor reallocations when these are costly. Reallocations are needed in order for the gains from trade to materialize. However, they may also leave unsolved social problems due to labor and capital market frictions, moving, reskilling and retooling costs, and lock-in effects in the presence of external economies, with the ensuing implications in terms of rising inequality, social immobility, status threat, and identity and cultural issues.

We analyze two scenarios: one with a benevolent government, and one involving a “biased” government whose decisions are based on an evaluation of the globalization footprint that differs from that of citizens. We also propose a tentative simple formalization that links this bias in government policy to failures of representation and an “unfair” aggregation of the globalization footprint as perceived by different categories of citizens.

We find that deglobalization may happen independently on whether the government is benevolent or politically biased, and it is more likely to happen the deeper the social footprint is.